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How you can put a dent in medical necessity denials

December 11, 2019

    As hospitals wage war on persistent margin problems, denials prevention remains a key strategic priority. And while our 2019 Hospital Revenue Cycle Benchmarking Initiative suggests a drop in overall denial write-offs, data on the reason for initial and denial write-offs indicates an important shift since 2017.

    Evaluate your revenue cycle performance 2019 benchmarking initiative

    In 2017, technical and demographic denials were a prominent challenge for providers, comprising the largest proportion (48%) of denial write-offs. Our most recent benchmarking demonstrates that providers have begun to confront these billing errors, as technical and demographic errors made up only 24% of denials in 2019.

    Despite the welcome reduction in technical and demographic errors, providers must now contend with a burgeoning clinical crisis. According to our research, medical necessity denials exhibited the largest categorical growth in over a decade of benchmarking. In 2017, medical necessity comprised 27% of denial write-offs; in 2019, that number jumped to 53%.

    Payer tools increase claim scrutiny

    There are three primary payer tools contributing to increased medical necessity denials: an overwhelming volume of automated reviews, increasingly complicated criteria, and unique contract requirements. Plans use algorithms to pull medical necessity issues and quickly deny a higher volume of claims. They also layer payer-specific requirements over CMS' suggested medical necessity criteria, and develop unique contracts with providers that differ in small but meaningful ways, making it difficult for providers to comply.

    Physician advisors bridge the clinical-financial gap

    Going forward, providers will need to combat medical necessity denials with a robust clinical defense infrastructure. A key feature is an active physician advisor program. When asked to self-identify the efficacy of their program, we found that organizations who believe their physician advisor programs work "very well" report 50% fewer medical necessity initial denials and 33% fewer medical necessity denial write-offs.

    However, simply having a physician advisor program will not stem the tide of medical necessity denials. Indeed, our analysis shows that there is no statistically significant difference between physician advisor type (in-house, combination, or outsource) and medical necessity denials. What really sets an organization apart is their ability to build a program that adheres to their existing capabilities.

    When building a new physician advisor program, providers should bear in mind three common pitfalls: recruitment difficulties, training considerations, and failure to define success. For one, it is challenging to find physicians with sufficient interest in, or experience with, being a physician advisor. Then, you must provide adaptive training platforms to keep the advisor up to speed with changing payer dynamics. Furthermore, your ability to measure performance will depend upon both availability and quality of data, and may need to be altered as the reimbursement landscape changes.

    ProHealthcare, a two-hospital health care system based in Wisconsin, improved its query response rates by 17 percentage points after implementing a successful physician advisor program. The system's physician advisor champions physician response rates to documentation queries. Under this program, physicians have a maximum eight-day outer limit in place for CDI response time. On Day 2 and Day 4, a reminder is sent to the physician from the CDI team. At six days, the physician advisor sends a reminder directly to the physician about his or her outstanding requests, dramatically improving time to coding.

    The threat of medical necessity denials is unlikely to abate in the coming years. The best defense against increasingly complex plan criteria and contract requirements is a strong physician advisor program—one that satisfies the unique needs and capabilities of your organization.

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